BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 1672 (Torres) - Housing-Related Parks Program Amended: June 19, 2012 Policy Vote: T&H 6-3 Urgency: No Mandate: No Hearing Date: August 6, 2012 Consultant: Mark McKenzie This bill does not meet the criteria for referral to the Suspense File. Bill Summary: AB 1672 would revise the criteria that the Department of Housing and Community Development (HCD) uses to award grants of bond funds from the Housing-Related Parks Program. Fiscal Impact: Potential acceleration of bond sales, which could result in increased debt service payments in the short term if demand exceeds original expectations of expenditure (Housing Urban-Suburban-and-Rural Parks Account - Proposition 1C bond funds). Minor costs to HCD to revise program guidelines (Housing Urban-Suburban-and-Rural Parks Account). Background: The Housing and Emergency Shelter Trust Fund Act of 2006 (Proposition 1C) authorizes the issuance of $2.85 billion in general obligation bonds, including $200 for housing-related parks grants in urban, suburban, and rural areas, which would be available upon appropriation by the Legislature. Existing law, as enacted by AB 2494 (Caballero) Chap 641/2008, established the Housing-Related Parks Program (HRPP) to provide grants for the creation, development, or rehabilitation of park and recreation facilities. HCD administers the program and awards grants to any city and county based on the number of affordable housing starts for newly constructed units in a given year, based on specified criteria. Awards are calculated on a per-bedroom basis and HCD has set the base award amount at $500 per bedroom for low-income unit and $750 per bedroom for a very low-income unit, and awards bonus funds for extremely low-income AB 1672 (Torres) Page 1 units, infill projects, and to cities and counties that meet other criteria. If eligibility for funds exceeds the amount available, HCD reduces all grants proportionately. The Legislature has only made a single appropriation of $25 million in HRPP funds to date. Although it was originally anticipated that HCD would make $25 million in awards each year, demand has been very low because of both the slowdown in housing construction and a decrease in funding available for affordable housing development. HCD only awarded $8.8 million for 2010 housing starts after issuing an initial Notice of Funding Availability (NOFA) for $25 million. After issuing a second NOFA for 2011 housing starts, another $11.3 million was awarded. The Legislature did not make an appropriation of new funds in the 2012-13 Budget Act, and HCD indicates that the remaining amount from the initial appropriation is insufficient to issue another NOFA. Proposed Law: AB 1672 would revise the eligibility criteria for the HRPP. Specifically, this bill would: Base awards on building permits, rather than housing starts. Expand eligibility to allow awards for both new housing units and affordable housing units substantially rehabilitated, acquired, or preserved with committed local assistance. Require a local jurisdiction's application to include documentation on issuance of building permits for new housing units or issuance of a certificate of occupancy for acquired, rehabilitated, and preserved housing units, as specified. Repeal a prohibition on HCD disbursing funds prior to receiving documentation of a city or county certificate of occupancy or final inspection. Require HCD to award "substantial" bonus funds for new housing units, to jurisdictions that commit to funding new park facilities or park improvements in a disadvantaged community, and to jurisdictions that qualify as park deficient. Require HCD to award additional bonus funds for units affordable to extremely low-income persons, units in infill projects, jurisdictions that have exceeded specified housing production thresholds, jurisdictions that conforms its general plan to a regional blueprint, and those AB 1672 (Torres) Page 2 demonstrating funds will be spent to support infill development. Staff Comments: This bill is intended to remove barriers to awarding funds in the HRPP, expedite distribution of grant funds, and increase incentives to jurisdictions to spend allocations in park-deficient areas, infill developments, and disadvantaged communities. By basing awards on building permits rather than housing starts, and expanding the program to include acquisition, rehabilitation, and preservation of existing low-income housing, AB 1672 will likely result in more successful applications and potentially larger individual allocations. As noted above, the existing program criteria, combined with extenuating economic conditions, have resulted in weak overall demand for the program to date. While the bill is expected to increase demand from current levels, it is unlikely that the bill's changes to the program will increase demand over the initial expectations of $25 million per year. To the extent that demand exceeds initial expectations, however, AB 1672 could create pressure to fund the program at a higher annual amount, resulting in an acceleration of bond appropriations and corresponding debt service payments. Any increase in bond appropriations would not likely occur until at least several years after the program has experienced excess in demand for funds over several cycles.